Could the ease of doing business be considered a predictor of countries' socio-economic wealth? An empirical analysis using pls-sem

Abstract

The wealth of nations differs significantly due to different factors. One of the reasons identified by previous studies is the level of entrepreneurship promotion by governments. This aspect has scarcely been studied empirically to date. Therefore, this paper sheds some light on this regard through building a construct out of ten Ease of Doing Business Index (EDBI) measures developed by the World Bank and relating it with a construct shaped by two measures of socio-economic wealth (SEW), namely gross domestic product and the Human Development Index. To this end, we conduct a structural equation model analysis using partial least squares (PLS-SEM) method with a 2018 database comprising secondary data from 190 countries. As the main contribution of this study, the results show that good performance in the EDBI ranking predicts good performance in the SEW ranking. Additionally, this study is pioneer in the use of these rankings to build composite constructs (latent variables) and relate them. For these reasons, our findings are useful for both academia and governments responsible for promoting entrepreneurship, as this latter is identified as the key enabler of economic development.